Fallouts from the collapse of a big company usually reach far beyond its own shareholders, employees, business partners and customers. The case of Hanjin Shipping offers a good example.
The shipper, the No. 1 in the nation and the No. 7 in the world, went into court receivership last week under heavy debt amounting to 6 trillion won (S$7.4 billion). It touched off a storm not only in the shipping industry but also the entire economy.
Now more than half of Hanjin’s 141-strong fleet are stranded in ports or sea because they were denied entry or exit due to concerns about their ability to pay fees.
One of the ships had already been seized in Singapore and some are staying away from ports to avoid the same fate. Another vessel was denied passage through the Suez Canal because authorities there were worried about securing toll fees.
Even Hanjin ships that secured docking permission had difficulty loading and unloading cargo due to payment problems. No wonder Hanjin already owes 650 billion won in overdue payments.
Put simply, a company which has been a key member of the global shipping family has become a castaway. More troubling is that the problem will not be limited to the company.
The Hanjin fiasco not only threatens to damage competitiveness of the Korean shipping industry. It is also battering the national economy, with exporters bearing the brunt of the storm.
The crippled operation of Hanjin ships is causing delays in the delivery of Korean-made export goods. Officials say Samsung Electronics and LG Electronics relied on Hanjin for shipments of more than 40 per cent and 20 per cent of their products, respectively.
Without emergency countermeasures, the malfunction of Hanjin cargo ships will take a further toll on Korea’s export-reliant economy which has already been struggling due to the global slump.
There is no doubt that Hanjin Shipping and its parent group with the same name are mainly responsible for the situation. It was right in this regard that the nation’s chief financial regulator demanded Hanjin Group and its chairman Cho Yang Ho to take “full responsibility” and take due measures, including injecting emergency operation funds.
It does not mean that the government can avoid blame for overlooking the need to prepare countermeasures in advance. The shipping industry has been in a deep slump since 2008, and there has been talk of industry-wide restructuring since 10 months ago.
Hanjin’s liquidity crisis began exacerbating three months ago, but it was only after it filed for court protection that the government formed a task force. Swift and effective measures should be drawn up and enforced so that the troubled shipping line does not submerge a greater part of the economy.
The Korea Herald is a member of The Straits Times media partner Asia News Network, an alliance of 21 newspapers.